The Dental Billing Podcast

How to Manage Patient Credit Balances

• Ericka Aguilar • Season 10 • Episode 6

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This episode focuses on the critical issue of managing credit balances in dental practices and the associated legal implications. Various state laws dictate how these balances should be handled, with non-compliance leading to potential fines, making it essential for dental offices to incorporate credit balance reports into their regular billing processes.

• Overview of why credit balances are often ignored 
• Importance of credit balance reports in financial management 
• Explanation of state laws and dormancy periods for unclaimed property 
• Consequences of failing to manage credit balances 
• Practical steps to take for compliance and management 
• Resources provided for state-specific compliance information 
• Call for proactive measures in managing credit balances


Link to check your states laws for unclaimed property:

https://unclaimed.org/state-reporting/

Want to learn Dental Coding and Billing? Join here:

https://tr.ee/efzYrY7mp-

Would you like to set-up a billing consultation with Ericka? We would love the opportunity to discuss your billing questions and see how Fortune Billing Solutions may help you.

Email Ericka:
ericka@dentalbillingdoneright.com

Schedule a call with Ericka:

https://calendly.com/ericka-dentalbillingdoneright/30min


Perio performance formula:

(D4341+D4342+D4346+D4355+D4910)/(D4341+D4342+D4346+D4355+D4910+D1110)


Want to know what your fee should be for D4346? Send Ericka an email to ericka@dentalbillingdoneright.com


Speaker 1:

Hello and welcome back to another episode of the Dental Billing Podcast. I'm your host, erika Aguilar, and in today's episode we are talking all about something I see way too often in dental offices, and we are talking about credit balances and let me tell you, friends, most offices are not handling them correctly. I decided to record this episode because I analyze two to three billing departments every single day. Sometimes I get a call on the fly and we're able to just dive right into the billing department with the doctor right on the call. Every time I do, I pull the same key reports. I pull the insurance AR because insurance companies love to stall payments. We need to identify those patterns as quickly as possible so we can respond accordingly. We don't want anything lingering in the AR. We have patient AR to see what's actually getting collected and with that report I do like to verify that treatment plans are being presented accurately, and there's a whole bunch of things that I look at.

Speaker 1:

I like to run the procedures not attached to claims report and that's called something different in each practice management software, but it's essentially the procedures for patients who have insurance. But they were just missed and maybe didn't make it onto a claim the procedures not attached to claims report will catch that and ensure that we're not missing procedures here and there. I also run the outstanding claims report, so I call this the unpaid revenue report, because these are claims that were created but never sent. I like to look at the top 30 procedures to make sure that the office is billing efficiently, we're using the right codes, we're not using codes that are deleted or we're using them in their correct intention. A lot of times we get coding revisions and that changes the way we use the code, so I want to make sure that we're on top of that. And then I also look at UCR fees, because undercharging is a silent killer. And finally, the topic of the day the credit balance report. Here's the crazy part Seven out of 10 offices that I look at have rarely ever, if ever, pulled a credit balance report. It is the most ignored report out there. Everyone is focused on the insurance AR and the patient AR, but the credit balance report gets ignored. That is insane to me. They are sitting on thousands of dollars in patient and insurance overpayments, completely unaware that failing to manage these properly can lead to compliance violations, fines and even legal trouble. I know that sounds extreme, but it's the truth. I wanted to create this episode to raise awareness about credit balances and encourage you to run that report today and start getting those credits off your books the right way. So let's talk about that a little bit.

Speaker 1:

Each state has its own laws on how credit balances must be handled, including minimum amounts that must be reported as unclaimed property. In my state of California, for example, any patient with a credit over $50 that remains unclaimed for three years must be reported to the state controller's office and before reporting it controller's office, and before reporting it, you're required to send a notice to the patient's last known address. In other words, you need to make efforts in order to return the patient's money to them or before you turn the money over to the state controller's office. You don't get to keep this money. You have to report it and turn it over to the state. Other states have similar laws. So if you think that your office is immune to all of these credit balances or addressing credit balances, you are wrong and we have to understand how to manage credit balances so that we don't end up getting fined for this.

Speaker 1:

Before we dive deeper, I want to make this even easier for you. I've created a state-by-state cheat sheet that breaks down the dormancy periods for unclaimed property reporting in every state. You can download it directly from the show notes to have a quick reference guide at your fingertips, because every state has a different dormancy period. Whether you're in California, with a three-year dormancy, or Florida, where the credits under $10 may be exempt, this guide will help you to stay compliant and avoid any legal troubles, so don't forget to grab your copy after this episode.

Speaker 1:

Okay, what exactly is a dormancy period? A dormancy period is the amount of time a credit balance can remain in your system before it is legally considered unclaimed property and it must be reported to the state and, as I mentioned earlier, each state has its own laws on this, but in most cases you're going to find it's usually three to five years. After that time, if you haven't refunded the patient or applied the credit to future treatment, you cannot just keep the money. The state requires you to follow its unclaimed property process, and it usually involves contacting the patient, and if they don't respond, you got to turn the funds over to the state. There's no way around that, and this is why I wanted to make this episode, because, as I am reviewing dental billing departments. I'm telling you, friends, credit balance reports are not being worked and we need to start incorporating this as a part of our monthly billing drumbeat, monthly billing task management.

Speaker 1:

So if you run your credit balance report, you're first going to want to look at your state laws and understand how many years are you allowed to keep a credit on file, and then what to do if it goes beyond that dormancy period. You want to make sure that you're handling your credits in compliance with your state law. It's very important, and I find that a lot of office managers, a lot of billers, have never even heard about the unclaimed property law. This is where I find a lot of offices get into trouble, because they don't even realize these rules apply to them. So make no mistake, friends, your practice is not exempt from credit balances, these unclaimed property laws. We have to manage this stuff, and ignoring this can result in audits, penalties and some serious financial consequences. So let's be aware now that you know better, you're going to do better, and we're going to dive into why this can be a legal issue.

Speaker 1:

So, unclaimed property laws every state has regulations and credit balances fall under this category. In most states, it's going to be called a credit memo, as I was reviewing each state's dormancy periods so that I could create the cheat sheet. For you guys, there's different categories under the unclaimed property laws and for us in a dental practice with patient credits, it's going to fall under the credit memos, and so, as I was going through, I noticed that there are government agencies cracking down on health care providers, including dentists and dental groups that have faced six figure fines for failing to refund patient overpayments. So we want to be very careful with that, as they are continuing to put more emphasis on looking into healthcare providers that have credit balances on record. Now I want to go over some of the ramifications of ignoring credit balances and friends.

Speaker 1:

This episode is not intended to create any fear around this. It is literally. I'm providing facts and I am also encouraging you to pay more attention to this report, because there are states that will impose penalties of up to 12% interest per year on unreported funds. So we just want to make sure that, as a dental practice, we don't want to have something like $50,000 in credit balance, because that could mean thousands of dollars in fines over time. So we want to make sure that, as we are compliantly billing out for services that are rendered. We also want to compliantly manage our credit balances according to your state law. Keep in mind that your patients talk and when patients find out that they have a credit on file and it was never refunded, they talk, and so we want to make sure that we are keeping credit balances under control so that it doesn't have a negative impact on reviews or complaints. That can hurt your practice reputation. So be very, very mindful of that.

Speaker 1:

And some states do classify failure to report credit balances as theft. So we want to not be accused of theft and we want to make sure that if the patient is owed money back for whatever reason, if they don't want to apply it to future credit and we want to have that documented that the patient does want that to be applied to future credit have something signed by the patient. If that is not the case, then we need to turn that money over to the state. If we cannot locate the patient. I have seen credit balances as high as $8,000 for patients over the past seven years, meaning we received overpayment, maybe the patient didn't complete the treatment plan and they have a credit of $8,000. On file and it's a legitimate balance, I'm sorry. Credit on file for seven years. I don't know about you, but that makes me feel some type of way about how that office is managing credits, because this particular office had multiple patients with thousands of dollars in credits and treatment plans that were not complete on file, and that's scary. To top that off, the office manager was not aware of unclaimed property laws for their state this was the state of Virginia and we don't want that to happen, because now that we've had a credit balance on file for seven years whether it's, you know, $50 or $8,000, you are required to report it within your state's timeframe, right?

Speaker 1:

However, what do you do when you want to be compliant? So now you're aware of this and you're going to run your credit balance report and you realize you have violated the state law, what do you do? The first thing that I want to let you know is that most states have programs for businesses that want to be compliant with credit balances. You've attempted to get in touch with your patients. You just couldn't and you didn't know you were supposed to turn it over to the state, and now you want to do that. They have programs that will help you navigate getting in compliant without the fines and without the legal ramifications, so that you can be compliant moving forward.

Speaker 1:

So I'm going to put a link in the show notes and this is going to be a state by state reporting of all the information that you need to get compliant for unclaimed property. It's going to have the state treasurer's office. It's going to have the phone number, the website, all the information you need to get compliant and if you have any questions about what to do with your credit balances, you can always reach out to your state treasurer's office and they are happy to help you get compliance. So I don't want you to be nervous, I don't want you to be scared. They're not going to. If you go to them and you say, listen, I didn't know that there was a state law, I want to be compliant, most likely they're not going to find you. They're going to help you get compliance. So don't let this scare you Again. I'm not trying to create this episode to create fear. I am doing it because I want you to win. I want you to do things compliantly.

Speaker 1:

So what do you do, or what should you do, if you haven't been managing credit balances? So the first thing is obviously run your credit balance report and identify all the patient credit balances that are above the minimum reporting. So, like in California, the credit balance has to be $50 or more and if that is the case and it's been three years, I need to attempt to send the money to the patient or report this money to the state. So it's important that we are not. We understand balance is owed to patients because they paid this money from insurance overpayment. So we're not talking about insurance overpayments here. Friends, I should have clarified that at the beginning of the episode. This does not have anything to do with insurance overpayments. That's a whole other episode that I should probably create about how to manage insurance overpayments. Secondly, if a patient is owed money, contact them and send a refund check. If they are unresponsive, then we're going to follow our state's unclaimed property guidelines. I would also like to say that when you're attempting to send the refund, I would send it certified, maybe a signature required so that you have proof that you attempted to send a refund check.

Speaker 1:

Know your state law Again. I mentioned this earlier. You have rules in every state that vary and we want to make sure that we understand what the credit balance rules are and how we need to navigate through all of this. Download your cheat sheet. It's in the show notes. I created that because I'm thinking to myself, putting myself in the shoes of an individual who is just learning about this and going oh my God, I've never run my credit balance report. I wonder how long we are allowed to have credits on file before I need to do something about it. That's the cheat sheet that I created for you. However, once you learn what your credit balance dormancy period is, please do go to the link that I provide in the show notes as well. I mean, there's so much information in there, but it's very organized by state and just go in there and research and get to know what you need to know.

Speaker 1:

Train your team also on preventing overpayments and how to handle them properly if and when they do occur, because we have patients that pay for treatment in full, up front, and sometimes treatment plans change, which means the cost of the treatment plan could end up being less than what we anticipated, and that's okay, except we have to manage that accordingly, right? So does that patient want to keep the credit balance on file, or do we need to refund the patient? And finally, if you are behind because you've been with an office for a while and never run your credit balance report, you're probably going to want to reach out to your state. They usually have. As I mentioned, they have programs. Reach out to your state. They usually have, as I mentioned, they have programs. It's called a voluntary compliance program and they are designed to help businesses getting good standing without penalties. So don't be afraid to reach out and find out what compliance programs you can participate in so that we can get compliant, report the credits that need to be reported and get this off of our books. Here are my final thoughts and calls to action for you so that we get compliant with credit balances.

Speaker 1:

This is not a small issue. It's a legal, financial and ethical responsibility to manage your credit balances properly if you have been ignoring them. Because, let's be real, into the practice as possible. I get that. I'm with you. I'm right there. But we also have to be aware of what we owe back to our patients. Take five minutes right now or at some point. Just take five minutes. Run that credit balance report and start reviewing which patients may be coming up on that dormancy period or have exceeded that dormancy period, and start to attempt to get their money to them, start the process, okay.

Speaker 1:

So I hope that this episode was valuable to you in the sense that it's got you thinking about your own credit balance report. I know this was a shorty episode, but I had to record it as I was reviewing some credit balance reports from yesterday, and I'm reviewing them and realizing that this particular client is well beyond. We're talking thousands and thousands of dollars that are owed back to patients, and this stems from lack of management, lack of credit balance management. So, friends, don't ignore your credit balance report. Pull that report, I would say as often as you pull your account receivable report. You know, we're always striving to make sure that AR is as neat as possible. When we are running a practice, there are certain reports that need to be attended to, and this one is no less important than your insurance AR, than your patient AR, very, very important. So, with that being said, I will close this episode out and I hope that you found value in this episode. Thank you for listening to another episode of the Dental Billing Podcast. Have a great day, friends.

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Ericka Aguilar

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